Sunday, August 24, 2014

One of the most common failures I see in startups is lack of focus. Unfocused entrepreneurs boast that their new technology will generate multiple disruptive products for consumers as well as enterprises around the world. Investors hear this as trying to do too many things with limited resources, meaning the startup will not shine at anything, and will not survive the competition.

For example, a while back I received a startup executive summary, requesting Angel investor funding, that touted technology for a line of new medical devices, also to be offered in a new military radar device. Even a company with unlimited money and people shouldn’t try to step into those two domains for the first time at the same time.

Other elements of startup focus are a bit fuzzier, so let me zoom-in on some key ones here:

Type of business model. Startups that try to mix a non-profit entity with a for-profit entity to share resources don’t work, and scare off investors. Providing shoes for the poor is a laudable goal, but quite a different business than Zappos, which sells clothes profitably, and provides free shoes for the needy due to social consciousness.

Solve one problem really well. Focus means starting with a problem that is painful, rather than a technology, and showing how you can solve that problem better than anyone else. Later in the pitch, you can show that you are not a one-trick pony by prioritizing related solutions in your long-term plan.

Limited goals and priorities. No organization can manage more than 3 to 5 goals and priorities without becoming unfocused and ineffective. Keep these balanced and aligned between people (customers, employees) and process (quality, service, revenue), and keep the scope realistic (eliminating world hunger is too broad).

Segment the opportunity. Targeting all the people in China as your opportunity gives you big numbers from a small penetration percentage, but will be seen as lack of focus by investors. Narrow the scope more realistically to people with specific age, income, and education demographics, that you can realistically reach with your marketing plan.

Keep your value chain consistent. Your value chain is your preferred business model, like premium quality, high service. If you mix that model with some commodity items, with no service, that will be seen as a lack of focus. Your team, customers, and investors will all be confused, leading to a lose-lose situation.

Simplify product scope. Your product will never have enough features to satisfy everyone, and it will never be perfect. Focus means creating a minimum viable product (MVP) first, and validating it in the marketplace. Feature-rich products take too much time and money to build, are hard to pivot, and will likely be slow and difficult to use.

Realistically frame the competition. If you really believe that IBM, Microsoft, and Oracle are your competition, you probably don’t have a business. It’s better to focus on a niche that none of them do well, and build your plan around that opportunity. Claiming you have no competition also implies lack of focus, or you don’t have a business.

Prioritize marketing channels. For a startup, it’s impossible to run an effective Facebook, Twitter, content marketing, and Google AdWords online campaign all at the same time. Focus on one channel at a time, measure results, and then move to the next. Offline, it’s not credible to talk about direct marketing, distributors, and integrators all in the same breath.

I certainly understand the pressure add more of everything to your plan, as you listen to more and more people, all with their own priorities and biases. But in the long run, you need a narrow and memorable focus to build a strong company. Even in the short term, customers and investors alike will help you carry a simple and clear focus all the way to the bank.